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12/09/2004

I removed the link to this article (http://www.msnbc.msn.com/id/6667060/) from the title because it was goofing up the overall look of the blog. DT 1/12/05

Recently, National Union Fire Insurance Co. of Pittsburgh brought the idea of insuring against the risk of injury on ski resorts, and the implications created by injury. Unlike most common insurance packages, this new policy covers the loss of season pass capacity. Most season passes cost upward of a thousand dollars. Historically, resort patrons ski and snowboard on parts of the mountain before enough snow has accumulated to cover dangerous hazards. The dangerous conditions often lead to injury. Sometimes, the injury sustained early in winter causes total loss of season pass holders. To remedy the injured pass holder, National Union Fire Insurance has developed an insurance package that covers the loss of a season pass as well as other medical expenses as a result of injury. Incidently the service of indemnifiying someone for a lost season pass is big news, and the source of big time revenue. NUFI has found a niche that is willing to pay for coverage. NUFI got a jump start on a market with high demand. Luckily for NUFI there is a limited number of companies who offer any kind of risk coverage to skiers. The market is an oligopoly. NUFI really cornered the market by offering a product that no other company has. Profit taking is being had right now. Most likely these short term profits and higher premiums will quickly start seeing Cournot model type results as competition stiffens.

12/08/2004

Anyway, I think Wal-Mart learned this Thanksgiving that their demand is more elastic than they thought it was. Someone probably ought to be fired for that blunder: isn't the whole point of Wal-Mart to demonstrate that everyone else's demand isn't as elastic as they thought?

12/06/2004

There has been a bigger, better, tastier, and more filling burger created in the market place. This burger is huge! As health conscience media and public list concerns over this 1400 plus calorie monster; many burger patrons are finding an answer to their appetite. The “Monster Thickburger” is a double decked burger consisting of bacon cheese butter and other rich in fat amenities. The market strategy for this is reaching those who demand a burger with a more saturated flavor. The strategy thus far is working. Some economist feel that this burger is nothing more then the practice of using excess capacity and inventories to reach those who demand a lot for a low price. There is one who thinks the Angus beef is possibly supplied by an excess of beef supply that is closely reaching expiration dates. The food is then sent to restaurants that have excess capacity; they then treat the meat and resell it at a lower price then it would other wise be sold. The price of the Monster Burger is much higher then an average burger. Thus, the burger is just about reaching a sale that almost generates an almost equal marginal revenue and marginal cost maximizing profits.

It is an oligopoly. Yahoo and Google share 92% of the search engine market. These two companies would seem to have a strong rivalry between the two of them. This is far from the truth. The strategies of Yahoo are night and day and still they somehow are able to compromise to use ideas from each other to better serve their companies. Google encourages their employees to spend a fifth of their work day on crafty innovations to try and find ways to incorporate them into the Google production cycle. Yahoo mainly depends on research and development to innovate new technologies then using other company resources to implement them into the daily framework. The companies also seem to have a common understanding to not compete one against the other but almost create a collusion to help create a larger demand for their product.

With Alan Greenspan being forced to retire in 2006 it will be interesting to see who President Bush puts in his place. Greenspan is a legend, having been at the federal reserve for almost 18 years. It is said that there may be two candidates: Martin S. Feldstein and R. Glenn Hubbard. Feldstein may have a tendency to butt heads with Bush and is said may not be the one to take Greenspan's place. Hubbard worked with Bush before and may be more likely but only time will tell. Greenspan's place will be a hard one to take over. Greenspan has had his own unique risk management method of getting things done. The way he does things cannot just be picked up by the next person to come in. Greenspan is almost a one man show but it will not work that way for the next person. Greenspan has been really good for the United States' economy. Who knows where the nation would be economically if he was not in charge of the Fed. The Fed is more open since Greenspan has been there and the whole structure of the Fed has changed. It will be an economic shock when Greenspan has to leave the Fed.

It is reported again that Continental Airlines, Pan American World Airways and Eastern are looking at strikes from its employees. Employees feel that because these airlines are either bankrupt or on the verge that their jobs are in jeopardy. It is said that they will not be able to strike because the union does not allow strikes while they are on the contract. Employees say they will strike anyway and that they have a right to walk out on the airlines if something does not happen to them to their advantage. I wonder what would happen to flights if the employees went on strike. It would be interesting to see.

This is not the only thing affecting airlines. There are also rising fuel prices. With jet fuel prices rising 74 percent within the last year, airlines are not sure what will happen to its revenue. Southwest Airlines however are doing really well and are taking the place of many of the airlines. What is happening to the airlines?

12/04/2004

Throughout this class we have created numerous bloggs and comments on individual's bloggs, with the incentive to get extra credit. It is a way we can see the views of our fellow class mates. We can go into real world application of the ideas we learn in our economic class. At least that is what we are suppose to think, right? Does it really help to understand economics or is it a easier way to get an A out of the class. I would have to admit I would not even be making this post unless there was an incentive for me. I need a few extra points.

Is it a good thing for Dr. Tufte to have us do these bloggs? I have heard from numerous people that they don't really care what they get on the aplia assignments. If they do bad they will just do one or two more bloggs and that will make up for any points they missed on the assignment. I admit I would never have read so much about oil prices and how they will effect the economy. Or what the merger between Sears and K-mart will do to the retail industry.

Proctor and Gamble sought allowance of post-marketing trials of the hormone patch Intrinsa, in order to bring the testosterone hormone to market where 3 million women who have had their ovaries removed would be P&G's primary buyers. However a FDA advisory panel, made up primarily of physicians, denied P&G's request citing concerns that in clinical trials cardiovascular safety issues weren't sufficiently tested. This is in part due to a not-for-profit organization's findings that postmenopausal women who take hormones are more likely to develop heart disease -- the number one killer of women in the U.S..

P&G apparently hasn't learned enough from Merck's recent Vioxx woes, if a medicine that turns out to be unsafe goes to market every personal injury lawyer in the nation will soon be filing lawsuits in every state of the nation. Although the potential profits of a drug that can cure sexual dysfunction are great, the potential losses from punitive damage awards could easily be more devastating than the benefits.

P&G needs to be patient and get a safe drug to market and enjoy the fruits with less risk of law suits and health problems for customers.

12/03/2004

Every time new job numbers come out there is a negative spin on them. Here is a quote from NBC News that shows my point, “adding just 112,000 new jobs overall in November. It was the weakest gain in five months and about half of what economists had forecast”. Why is this description in the opening paragraph of the story? Why can’t reporters put a positive spin on this and not there normal doom and glum that is ever present in the media. In the same story just further down the page it points out the unemployment rate went down again.

Even though job growth was not what was predicted, any new jobs created is a good thing.

12/02/2004

On Thursday the United Parcel Service announced that it would acquire operations of a large Chinese firm, SinoTrans. This deal would bring the famous brown clad deliverymen to over 200 cities throughout what could soon be the largest cargo market in the world. Rocketing trade in the recently booming economy is what is driving the need for increased cargo business. UPS said it plans to establish a air hub at Shanghai International by 2007. With parcel traffic out of the company increasing 130%, UPS' increasing presence comes without a moment to spare.

United Parcel, as many other U.S. firms, has seen that as China's Iron Curtain becomes more transparent the need to be a first mover in the world's most populous nation is paramount. For UPS they may be little late as industry leader FedEx has had an established presence in China for some time, and UPS faces an uphill battle in that nation. Nevertheless UPS' move will no doubt prove a positive move for UPS shareholders.

Michael Malone, a guest speaker for the MBA program at Oxford School of Business, talked to the students about entrepreneurship. He asked the audience to raise their hands if they considered themselves entrpreneurs. About 200 out of 400 raised their hands. Malone then reported that four years prior only about 20 hands went up in an audience of about 400. What a drastic increase!

More individuals are seeing businesses be successful and want to join in on those profits. However, with so many entrepreneurs desiring to enter the market, demand will decrease within their industry of choice and economic profits will also decrease to zero. But of course, the market will not support this, so some will pull out and profitability will rise again. However, the cycle continues. Others will join the market hoping to find profits and will decrease demand and economic profits. The only companies that are most likely to survive are those with the most capital and equity to sustain them in the long-run.

I have been thinking about buying a new computer, but I ran across this article that makes me believe that if I were to buy something now, it will be obsolete in about a year and a half! IBM, Sony Corp. and Toshiba Corp. have been working in secret to produce the powerful new “Cell” processor. Cell will be ten times more powerful than conventional chips and be able to shepherd large chunks of data over broadband networks. The three corporations are currently investing billions of dollars to develop and prepare for mass production of Cell. The COO of Sony said that “current PC architecture is nearing its limits.” Toshiba and Sony are both releasing new Cell powered TV’s in 2006, and the next generation PlayStations will be using the microchip. All of the technical details will be revealed in February.

This is awesome for technology, but what about those of us who can’t afford to keep up all the time?

12/01/2004

Due to the lack of funds, scheduled testing on the casks used to transport nuclear waste will not be performed. But even without the testing, the federal Nuclear Regulatory Commission has approved the casks. An estimated 3,000 tons of nuclear waste a year will pass through 45 states in its way to Yucca Mountain in Nevada.

The actions of the Nuclear Regulatory Commission are nothing less than gambling with the lives of more than 11 million U.S. citizens.